COMPREHENSIVE EXAM IN ENGINEERING ECONOMICS

PART 2

ANNUITY
Problem No.1: If P25, 000 is deposited now into a savings account that earns 6% per year,
what uniform annual amount could be withdrawn at the end of each year for ten years so
that nothing would be left in the account after the 10th withdrawal?

Problem No. 2: You can buy a machine for P100, 000 that will produce a net income, after
operating expenses, of P10, 000 per year. If you plan to keep the machine for four years,
what must be the market resale value be at the end of four years to justify the investment?
You must make a 15% annual return on your investment.

Problem No. 3: Sixty monthly deposits are made into an account paying 6% nominal
interest compounded monthly. If the subject of these is deposits is to accumulate
P100,000 by the end of the fifth year, what is the amount of each deposits?
Problem No. 4: What is the principal remaining after 20 monthly payments have been made on
a P20,000 five-year loan? The annual rate is 12% nominal compounded monthly.

Problem No. 5: How much should be deposited each year to 12 years if you wish to withdraw
P309 each per years for five years beginning at the end of the 15th year? Let the interest
rate be 8%per year.

Problem No. 6: An individual is borrowing P100, 000 at 8% interest compounded annually. The
loan is to be repaid in equal payments over 30 years. However, just after eight payment is
made, lender allows the borrower to triple the payment. The borrower agrees to this
increase payment. If the lender is still charging 10% per year, compounded annually, on
the unpaid balance of the loan, what is the balance still owed just after the 12 payment is
made?

Problem No.7: A woman arranges to repay a P 102,000 bank loan into equal payment at a 10%
effective annual interest rate. Immediately after her third payment, she borrows another
P5, 000 also at 10% per year. When she borrows the P5, 000 she talks the banker into
letting her to repay the remaining debt of the first loan and the entire amount of second
loan in 12 equal payments. The first of these 12 payments would be made one year after
she receives the P5, 000. Compute the amount of each of the 12 payments?

Problem No. 8: A loan of P10, 000 is to be repaid over a period of eight years. During the
first four years, exactly half of the loan principal is to be rapid (along with the
accumulated compound interest) by uniform series of payments of A 1 per year. The other
half of the loan principal is to be repaid over four years with accumulated interest by a
 uniform series of payments of A2 per year. If I = 9% per year, what are the value of A 1
and A2?

DEFFERED ANNUITY
Problem No. 9: A debt of P40,000, whose interest rate is 15% compounded semiannually,
is to be discharged by a series of 10 semiannual payments, the first payment to be made 6
months after consumption of the loan. The first 6 payments will be P6,000 each, while
the remaining 4 payments will be equal and such amount that the final payment will
liquidate the debt. What is the amount of the last 4 payments?

Problem No.10: A man invested P50,000 now for the college education of his 2-year old
son. If the fund earns 14% effective, how much will the son get each year starting from
his 17th to the 22nd birthday?

ANNUITY DUE

Problem No.11: Suppose that P 400 is deposited each year into a bank account that pays
8%interest annually. If 12 payments are made into the account, how much would be
accumulated in his fund by the end of the 12 th year? The first payment occurs at time
zero (now).